Fiat standard vs gold and bitcoin standard

[UnitedNot]

I would like to learn more about fiat and why a fiat standard is doomed to fail. I am a complete newbie in everything economics.
Video sources are preferred but also quality tutorials are ok.

How is fiat created? Why is it debt-based? How does it create inflation? How do banks, central banks and world governments manipulate all this?
Why was the gold standard better, and what could happen under a bitcoin standard?

Bear with me, I dont know much about this thing. What would you suggest for a newbie who doesnt know much about the topic to do. The terminology will also probably be completely new to me.

THX

[tranthidung]

I would like to learn more about fiat and why a fiat standard is doomed to fail.

How is fiat created? Why is it debt-based? How does it create inflation?

Your later questions answer your first question. Fiat currency fails and loses purchasing power because of inflation that is continuously made by governments and central banks. If you need an example, please look at the biggest fiat currency.

Terrible purchasing power of US. dollar over time

Why was the gold standard better, and what could happen under a bitcoin standard?

Gold is better because it is inflation too but it can not be printed by governments. You have to mine gold, not get it from printing or minting.

With Bitcoin, it is inflationary too but the inflation rate is smaller with time, and after 2140, it will become deflationary. Currently after four halving times, Bitcoin inflation chart is already in a flat area.

How is the 21 millions Bitcoin cap defined and enforced?
Controlled supply

[Dunamisx]

How is fiat created? Why is it debt-based? How does it create inflation? How do banks, central banks and world governments manipulate all this?

How should one start in explanation of all the procedures in these, what i will recommend here is two, if you think you're not ok with the way we all depends on the use of a centralized currency under fiat government controlled financial economy, then the best alternative is bitcoin because the entire process on printing the fiat currency and the likes were not perfect enough to stop the effect of inflation over the economy, while the masses were being affected in this.

Why was the gold standard better, and what could happen under a bitcoin standard?

Gold had a preferred dominance then over many currencies and people realized it as a global most acceptable physical asset in which is always profitable, that was before the introduction of bitcoin, but as for now, bitcoin has taken over all from every other profitable investment asset including gold and dollar which centralized while bitcoin remained decentralized and most preferred option on this.

[kryptqnick]

Op is asking a lot of questions, and such questions require diving deeper into the world of economics, but some statements are also opinions. For example, fiat is not doomed to fail, it's been operating quite successfully globally. Also, the gold standard was abolished for a reason, and it's debatable whether it was better than fiat. Bitcoin is also not something we can confidently claim to be better than fiat and the gold standard. It's just different, as it is not issued by a central authority, its supply is coded to work in a certain way and involved mining (which is where comparison with gold comes in).

[PrivacyG]

Why was the gold standard better

It was like securing the value of your Money.  With no Gold Standard, your Money has a relative value that is not guaranteed.

and what could happen under a bitcoin standard?

Bitcoin Standard is only going to stay an imaginary scenario, or so I believe.  I really, really doubt there will ever be a Bitcoin Standard any where in the World.  Simply because even Gold is easier to manipulate than Bitcoin is.  Bitcoin is Transparent, keep this in mind.  Most of the World is corrupt.  They would never agree to backing up their own Coin in a Transparent Currency.  In fact, I do not even know if it is possible in fact to have it as a Standard at all.  Seems much more complicated than having Gold was.

[SquirrelJulietGarden]

Bitcoin Standard is only going to stay an imaginary scenario, or so I believe.  I really, really doubt there will ever be a Bitcoin Standard any where in the World. 

Bitcoin has good adoption growth rate so far, it's very impressive and more people became Bitcoiners, Bitcoin maximalists or simply Bitcoin users. It's good and impressive but it is far from Bitcoin Standard that needs to be adopted legally by governments at nearly whole of the world. This condition is very big and hard to achieve so Bitcoin Standard is something hardly achievable too.

Simply because even Gold is easier to manipulate than Bitcoin is.  Bitcoin is Transparent, keep this in mind.  Most of the World is corrupt.  They would never agree to backing up their own Coin in a Transparent Currency.  In fact, I do not even know if it is possible in fact to have it as a Standard at all.  Seems much more complicated than having Gold was.

I agree with you that governments globally know very well that they have many things to hide against their citizens and benefits of citizens as well. Bitcoin provides something different, transparent, traceable and beneficial so that governments will try as best as possible to prevent citizen's exposure and access to Bitcoin as much as possible.

They know, after 15 years since 2009, that if citizens exposed, used and fell in love with Bitcoin, they will not separate from Bitcoin. So they want to proactively take action, build as many barriers as possible to delay and reduce adoption growth of Bitcoin at their nation and at global scale.

[Solosanz]

Fiat standard isn't a failed system if you're a government, population tend to increase, if they use gold standard where supply is limited, the world would be chaos since the poor almost have no chance to survive as the government can't print new gold. The poor can survive because the government give donation, they do collect tax from the rich, but the rich do tax evasion in order to reduce the tax.

But, since we're citizen, not government, we need to hold gold or Bitcoin instead of fiat.

[tabas]

How does it create inflation?

The more paper money in circulation, the more it adds cost to the inflation and that's why we're nowhere to go but to see an inflation yearly as the government, FED, or those that are tasked to do it will continue to print for which they think it's a way to combat inflation. It's an unending cycle and there's no way to defeat it as per government's so process.

How do banks, central banks and world governments manipulate all this?

It's because they are the government. They make rules, they make everything they think as the standard.

Why was the gold standard better

This is where most of the countries if not all agree to have something of a greater value and even in the past, there's already the value within it. Each of them won't agree that their fiat is better than the other so the gold standard came out. And this is the one that dictates value of paper money as well, cmiiw.

and what could happen under a bitcoin standard?

It's not impossible but unlikely, maybe for countries that have adopted bitcoin as a legal tender, there is a chance. But people can't just go on with a highly volatile monetary standard.

[UnitedNot]

Your later questions answer your first question. Fiat currency fails and loses purchasing power because of inflation that is continuously made by governments and central banks.

OK but why is the printing of new money causing a loss of value in a fiat currency and who determines and decides that the currency is now less valuable and that prices will go up? Fiat isnt a free market adopted by the people. What is in the background that determines how much one currency will be worth against a different currency, gold, or bitcoin?

For example, fiat is not doomed to fail, it's been operating quite successfully globally.

I think the word successfully that you used is very subjective. I said doomed to fail because the money gets devalued. Imagine you save for several years to buy an apartment. After a long time, you have €300.000. Happy that you have finally made it, you find out that those €300.000 will no longer be enough as they were several years ago. Now you need €500.000. 

The more paper money in circulation, the more it adds cost to the inflation.

Why and how?

[mrust_mobile]

Bitcoin standard will never happen and it is because bitcoin is way too scarce to be used as money. Gold is scarce too but you can always dig more from the ground. The sea water has it, asteroids have it… Right now it is too expensive to mine gold in space or extract it from the sea water but they are there and maybe one day the tech will make it easier.

There is no way to create more bitcoins on the other hand and that’s a problem. It is because the human population doesn’t stay same. We expand, so the monetary base needs to expand too.

The problem with FIAT is, the central banksters can print it out of thin air and expand the supply way too fast. When the supply gets inflated ahead of its time, the prices rise and cause “inflation”. People usually confuse “inflation” with “price rises”. Inflation is the expansion of money supply. Increasing prices is the result.

If we had to mine more gold to expand the money supply we would get a more natural growth but since humans are corrupt lying shits, we will never have it. And when I mean we are corrupt, I don’t necessarily mean us all.

It is like dropping a tiny shit nugget in a perfectly clean glass of drinking water. The moment you drop it, the water isn’t clean anymore.

So as long as there are some corrupt people, whole humanity will have to suffer.

[tabas]

The more paper money in circulation, the more it adds cost to the inflation.

Why and how?

The law of supply and demand applies to this. The more money the country has in circulation, the higher the demand for most goods becomes because everyone has money to spend. And when it happens, the price of goods increases and that's one sign that the inflation rate increases as well. If you look at the Fed adjusting interest rates, that's how they control inflation so that people will borrow money, stop spending money, and so on. That's why the supply of money and printing more of it has always been the consequences that all of us will bear.

[vitya1982]

I would like to learn more about fiat and why a fiat standard is doomed to fail.

How is fiat created? Why is it debt-based? How does it create inflation?

Your later questions answer your first question. Fiat currency fails and loses purchasing power because of inflation that is continuously made by governments and central banks. If you need an example, please look at the biggest fiat currency.

Terrible purchasing power of US. dollar over time

Why was the gold standard better, and what could happen under a bitcoin standard?

Gold is better because it is inflation too but it can not be printed by governments. You have to mine gold, not get it from printing or minting.

With Bitcoin, it is inflationary too but the inflation rate is smaller with time, and after 2140, it will become deflationary. Currently after four halving times, Bitcoin inflation chart is already in a flat area.

How is the 21 millions Bitcoin cap defined and enforced?
Controlled supply

https://blog.lopp.net/content/images/size/w1140/2022/01/bitcoin-inflation-chart-1.png

Gold is better, but it's not a currency, it's an asset. Like Bitcoin for a lot of us. It can be both, but it's not too widely accepted. So, fiat is obviously losing its power with time, but only idiots keep their money in fiat.

[UnitedNot]

The law of supply and demand applies to this. The more money the country has in circulation, the higher the demand for most goods becomes because everyone has money to spend. And when it happens, the price of goods increases and that's one sign that the inflation rate increases as well.

A producer of goods or provider of services makes their goods and services more expansive if people are willing to pay for it or they will lower the price if they cant sell what they expected. But why is that a sign of inflation and what makes the units of money I own worth less?
I hope someone can point me to a beginner friendly source where I can learn about this. I am getting bits and pieces here but I cant create a bigger picture.

[tabas]

The law of supply and demand applies to this. The more money the country has in circulation, the higher the demand for most goods becomes because everyone has money to spend. And when it happens, the price of goods increases and that's one sign that the inflation rate increases as well.

A producer of goods or provider of services makes their goods and services more expansive if people are willing to pay for it or they will lower the price if they cant sell what they expected.

The consumers have no choice but to bear whatever they predict with the prices. But they don't just increase the prices for no reason. If their cost of providing those services and production of products have increased due to cost of raw materials and transportation, they'll pass it down to the consumers and that's why many of us struggles through it. We're not willing to pay for it because we want those, we're paying it and we have no option because we need it.

But why is that a sign of inflation and what makes the units of money I own worth less?
I hope someone can point me to a beginner friendly source where I can learn about this. I am getting bits and pieces here but I cant create a bigger picture.

It's simple, our purchasing power becomes lesser due to inflation. Your $100 last year will still be $100 but its value for purchasing goods won't be the same as $100 before, depending on the percentage of inflation then it could be $90, $95 but not $100 anymore.

[m2017]

Why is it debt-based?

Because it is financed using future profits, which allows the economy to develop faster, but on credit.

How does it create inflation?

This is a side effect that occurs due to the increase in the emission of money. The more pieces of paper circulate in the economy, the less valuable each individual piece of paper becomes.

How do banks, central banks and world governments manipulate all this?

There is such a thing as an inflation tax, which allows all of the above guys to make a profit from the money of their citizens.

Why was the gold standard better, and what could happen under a bitcoin standard?

Better in what?
For example, the gold standard is worse in terms of economic growth rates. That is why it was cancelled.
Bitcoin standard doesn't yet exist and it is not known whether it will exist at all.

[PrivacyG]

I agree with you that governments globally know very well that they have many things to hide against their citizens and benefits of citizens as well. Bitcoin provides something different, transparent, traceable and beneficial so that governments will try as best as possible to prevent citizen's exposure and access to Bitcoin as much as possible.

Keep in mind that a Bitcoin Standard means the Governments have to accept a defeat against Bitcoin.  No big Government would do that.  It would mean the purpose of Bitcoin is fulfilled, which they hate.  It is a very tough job, they rather create and use a CBDC instead using principles that at first glance seem similar to the ones of Bitcoin.

[Blitzboy]

This whole fiat money thing is a house of cards. They create it out of thin air, and whose advantage results? Not me, not you. Its the government, the major banks, engaged in games. They generate more of it each time they loan money.

Bitcoin creates a different story. All there on the blockchain for everyone to view. There is no funny business or secret tricking. You know how much is out there; it wont change depending on the whim of some politicians. Thats the kind of integrity our money demands, people. It reflects our direction, a future in which we can rely on technology instead of merely the hollow assurances of the establishment.

Take it from me, money isnt just about dollars and cents. Its relates to security and trust. Its about realising the system operates for everyone and is fair. This is why we should grasp this material, folks. It goes beyond simply accumulating riches. Its about regaining control and about laying a better future for our children and ourselves.

[CageMabok]

A producer of goods or provider of services makes their goods and services more expansive if people are willing to pay for it or they will lower the price if they cant sell what they expected. But why is that a sign of inflation and what makes the units of money I own worth less?
I hope someone can point me to a beginner friendly source where I can learn about this. I am getting bits and pieces here but I cant create a bigger picture.

The real sign of inflation is when the amount of money that you used to be able to eat everyday for a whole month, but now that amount of money is no longer enough to eat everyday for a whole month because there is a spike in the price of food that you often consume or food that is often consumed by many people. This means that to get a picture of inflation you have to look at the prices of basic goods that you often buy in the past with the prices of those basic goods today so that you will get a little understanding of it.

[tranthidung]

OK but why is the printing of new money causing a loss of value in a fiat currency and who determines and decides that the currency is now less valuable and that prices will go up?

If total assets in a nation is the same, but government and central bank print more money from the air, money printing manufacturers, you can see a simple situation, purchasing power of each $ must drop and locals must use more money to buy same item than what they spent before a wave of money printing.

Inflation and purchasing power has negative correlation, with assumption that other factors are the same. Think about Bitcoin, total supply is the same but demand on owning bitcoin will increase, price must rise with time and after some years, one decade, looking back we will see very parabolic growth.

The real sign of inflation is when the amount of money that you used to be able to eat everyday for a whole month, but now that amount of money is no longer enough to eat everyday for a whole month

This is a good explanation but it is more easily to understand with this graphics.
Don't pay attention on accuracy of numbers in the graphics, just an example.

[UnitedNot]

Because it is financed using future profits, which allows the economy to develop faster, but on credit.

You mean the interest paid on top of a loan?

This is a side effect that occurs due to the increase in the emission of money. The more pieces of paper circulate in the economy, the less valuable each individual piece of paper becomes.

But my question is how? What is the mechanism in the background that determines this? Who or what decides that your fiat is now less valuable against BTC, gold, and other currencies? Who keeps track of it? The same institutions doing the printing? Why would anything they say be trustworthy?